A federal judge for the Northern District of California on May 11 dismissed a legal action filed by Charles Schwab against the Financial Industry Regulatory Authority (FINRA) challenging a complaint the regulator levied against Schwab on Feb. 1. That complaint claimed Schwab violated FINRA’s rules by requiring its customers to waive their rights to bring class actions against the firm.
But the judge allowed the issue to move forward through FINRA’s disciplinary process. The ruling on May 11 by U.S. magistrate judge Elizabeth LaPorte “addressed the procedural issue of which forum, FINRA or the federal court, will first hear the dispute,” Schwab spokesman Greg Gable told AdvisorOne.
The ruling, which was a “procedural ruling only,” Gable said, “means that the process will proceed through a series of disciplinary hearings, leading up to a final review by a Federal Circuit Court.” LaPorte’s decision, he said, “did not make any adverse ruling with respect to the merits of Schwab’s position on the case itself. The case will now be heard on its merits by the FINRA disciplinary panel.”
FINRA spokeswoman Nancy Condon declined to comment.
When Schwab filed its countersuit on Feb. 1, the firm said that it believed “a federal court is in the best position to properly and efficiently resolve this novel dispute and intends to defend against any disciplinary action brought by FINRA while seeking a prompt judicial determination of the underlying legal issues.”